Beware! Tax bumps ahead for diesel cars

At a time when diesel-powered vehicles have been driving sales in the country's otherwise sluggish automobile market, the industry has been hit by a double whammy.

First, a proposal to levy an additional annual road tax of up to Rs 50000 on diesel sports utility vehicles.

Second, a suggestion before the Supreme Court to impose an environment tax of 25 per cent (of the cost of the vehicle) on diesel vehicles to curb the growing levels of pollution in the Delhi-National Capital Region.

These have raised concerns in the domestic automobile industry, battling slow sales and high interest rates and fuel prices.

"On an average, diesel vehicles are tagged 20-23 per cent higher than ex-showroom prices of petrol variants. Once Euro-V emission norms come into effect, vehicle prices would automatically rise Rs 40000. If there are additional levies, it would certainly put manufacturers' investments to increase diesel capacity in jeopardy," said a senior industry executive.

"Through the last two years, automobile companies have invested Rs 22000 crore, a major part has gone into increasing diesel production capacity. If there is so much ambiguity in government policy, how would the industry take decisions on investing in the country?" asked Vishnu Mathur, director general, Society of Indian Automobile Manufacturers.